Procurement Policy Notice for academies

26th March 2020

Under government rules, academy trusts are considered to be a Contracting Authority. This means that they are subject to further government guidance around procurement (one of which in normal times would be the application of OJEU rules). 

However with the economic uncertainty that has arisen with COVID-19, the government have issued a Procurement Policy Notice that will be applicable to academy trusts.  

The stated aim of the policy is to ensure that service delivery continues during (where possible), and after the COVID-19 outbreak.

The guidance goes as far to say: “Contracting authorities must act now to ensure suppliers at risk are in a position to resume normal contract delivery once the outbreak is over."

All contracting authorities should:

  1. Urgently review their contract portfolio and inform suppliers who they believe are at risk that they will continue to be paid as normal (even if service delivery is disrupted or temporarily suspended) until at least the end of June. 
  2. Put in place the most appropriate payment measures to support supplier cash flow; this might include a range of approaches such as forward ordering, payment in advance/prepayment, interim payments and payment on order (not receipt). 
  3. If the contract involves payment by results then payment should be on the basis of previous invoices, for example the average monthly payment over the previous three months.
  4. To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors.
  5. Ensure invoices submitted by suppliers are paid immediately on receipt (reconciliation can take place in slower time) in order to maintain cash flow in the supply chain and protect jobs.

For the average academy trust, over 70% of their costs will be payroll, so not applicable to the above guidance.

There will then be a large number of low risk suppliers (i.e. local authority, energy suppliers etc) and also a number of one off suppliers used throughout the year. The area of focus will need to be the suppliers that you use on a regular basis (and have a contract with). This could include services such as:

  • Catering
  • Cleaning
  • Maintenance services
  • 3rd party education providers (pupil referral units possibly depending on your contact with them)
  • Bus companies

Key issues for the academy trust when implementing this process include:

  • Process for considering which suppliers are at risk
  • Process for determining the level of payment (i.e. advance payment) to be made
  • How this is implemented with your finance policy

The last bullet point is particularly relevant.

Managing Public Money prohibits payment in advance of need, and it is considered novel and contentious. Consent has temporarily been granted until the end of June 2020, but only where the Accounting Officer is satisfied regarding the VFM case by securing future delivery. Also this consent is capped at 25% of the value of the contract. You must document this to Accounting Officer.

An important point to note is that this guidance is very much about the cash flow, and not about the cost. So even if you are paying out cash, if the service has not been delivered, (unless there are some unusual terms in the contact) then the payments made will be prepayments in your monthly accounts.

Academies are probably well placed to be able to comply with this guidance, due to the recurrent grant nature of funding received from the ESFA. However, you will still need to manage your cash flow carefully.

If you have any queries please contact Ben Thorne or your usual Bishop Fleming contact.

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